Listen Here
Today, we have an insightful guest joining us, Omar Khan, founder 
of Boardwalk Wealth and a seasoned expert in private equity and multifamily real estate. With over $800 million in transactions under his belt, Omar stands out for his unique combination of institutional finance experience and multi-generational entrepreneurial background. His deep knowledge and strategic approach have helped him and his investors navigate the complexities of acquisitions, developments, and restructurings in ever-changing markets.
In this episode, Omar sits down with host Dave Wolcott to pull back the curtain on what’s happening in today’s commercial real estate landscape. Omar shares his entrepreneurial journey, starting from his upbringing in a financially sophisticated family, and how that foundation led him into private equity and large-scale real estate deals.
Throughout the conversation, Omar candidly discusses the challenges facing syndicators and investors in the current market and why disciplined underwriting and choosing the right partners are more critical than ever. He also demystifies common misconceptions about the housing shortage, emphasizes the importance of liquidity alongside returns, and shares how his team’s innovative development strategies are helping them deliver cash flow faster while minimizing risk, especially in the Midwest.
Whether you’re an experienced investor or just getting started, Omar’s insights into smart portfolio allocation, due diligence, and navigating market cycles offer practical wisdom for building lasting wealth.
In This Episode
- Why liquidity is just as important as generating returns in your portfolio
- The truth about the so-called housing shortage and where demand lies
- Key lessons in due diligence and underwriting deals during down cycles
- How innovative development strategies can outperform in today’s market
If you’re exposed to interest rate-sensitive investments, interest rates and macroeconomic factors play a huge role in the result of your investment.
Welcome to the Wealth Strategy Secrets of the Ultra Wealthy podcast, where we help entrepreneurs like you exponentially build wealth through passive income to live a life of freedom and prosperity. Are you tired of paying too much in taxes, gambling your future on the stock market, and wanting to learn about hidden strategies for making your money work for you? And now, your host, Dave Wolcott, serial entrepreneur and author of the bestselling book The Holistic Wealth Strategy.
Hey everyone. Welcome back to another episode of Wealth Strategy Secrets of the Ultra Wealthy. Today, we’re welcoming back a returning guest and trusted voice in the private equity and multifamily space. Omar Khan, founder of Boardwalk Wealth. Omar is a seasoned investor with over $800 million in transactions under his belt across acquisitions and developments, and restructurings.
With deep roots in both institutional finance and a multi-generational entrepreneurial family, Omar brings a rare combination of global perspective, strategic insight, and battle-tested experience.
In this episode, we go deep into the realities of today’s commercial real estate market, why so many syndicators are being challenged, and how Omar is navigating this environment with disciplined underwriting and a niche development model that’s outperforming in the Midwest. We cover the truth about the housing shortage myth, why liquidity should be as important as returns in your portfolio, the difference between projections, preferred returns and guarantees, the 80:20 rule in private markets, how his firm re engineered new development to deliver cash flow faster and reduce risk, and the number one mistake investors make when chasing IRR projections.
Omar doesn’t pull any punches. If you want unfiltered insight into what’s really happening in private equity and how to allocate smartly in 2025, check out this episode. Omar, welcome to the show.
Thanks, Dave. How are you doing? Before the show, we were talking about your palace on the water in Sarasota. So, please tell us, how far are we before we can see that?
Oh no. You know, we moved here a couple of years ago from Sarasota, you know, and in fact, we met back when I lived in Virginia, and it’s been amazing to. I think this whole thing around geographical freedom, right, is just really empowering post-pandemic, and that we were able to get rid of state taxes in winter all in one fell swoop. So when you kind of think about it right now, you have a lot of opportunities in terms of where you could live in the world today. So we wanted to be closer to family. My wife has family down here. We like the water, so that’s pretty neat. And yeah, we’ve been working on kind of a construction project, so it’s interesting.
But excited to have you in today. Omar is a prior guest of the show as well, and wanted to bring him back and talk some specifics about, you know, the real estate market overall. Would like to talk about really, you know, due diligence and what you’re kind of seeing in the market. Of course, we’re going to peg you with pulling out your crystal ball and giving us some predictions on, you know, your gut feel on some different things. But Omar is a very sophisticated investor, successful in, you know, multifamily as well as, you know, really private equity in the private equity market. So why don’t we begin there, Omar, and you know, for folks who you know haven’t heard of you before, tell us about your upbringing, which I know is unique, and kind of how you got into private equity and commercial real estate in the beginning.
So look, I mean in many ways I feel like I’m very blessed, and not in many ways, I think in all ways I feel I’m very blessed. I grew up in an entrepreneurial family. Depending on how you count, it could be the third or fourth generation of entrepreneurs because a lot of times, by the second generation onwards, it’s more management of the estate, as well as less proliferation of the estate. But anyway, that being said, my family is fairly financially sophisticated. So you know, when you grow up in that environment, it’s not like they’re trying to tell you, hey, go do this. It’s more like, you know, when you’re around, look, I’ll give you an example. Now I know more doctors because my wife’s a doctor. So a lot of kids who grow up in a two-parent physician household are more attuned to that line of work, that profession.
If you grow up in a two-engineer household or an engineer household, just process of osmosis is that you will just pick up more things along the way. So it was more along that sort of way. And frankly, in high school, I very quickly realized I had absolutely no talent for the hard sciences like physics or chemistry, or even biology. So, it was conceptually in my mind an easier transition to go into accounting, economics, and finance. And that’s what I did in my undergrad. I worked in an investment bank, depending on the first portfolio management, then did my CFA, then worked in an investment bank, worked in Oil and gas, M and A. So it was a combination of, say, a good environment in this regard, financially sophisticated, growing up, then being pulled into those professional settings, you know, as you progress through the academic and professional ranks. And then finally I was in Canada for all this time for undergrad and then college, and then post-college work experiences.
But when I moved down to the us, I met my wife, and moved down to the US at that time, I believe it was the right place, right time, right set of experiences, you know, a lot of things have to go right for you. And that’s basically how the journey started. In a nutshell, we’ve done close to $800 million. We’re sector specialists, all multifamily. We do acquisitions, developments, and restructurings. And along the way, the whole idea is that hopefully you’re adding value along the way, and market cycles come, market cycles go. We’re going through a bit of a negative time right now for everyone in the industry. Not just real estate, it’s venture or private equity in general.
So the whole idea when you’re on the downtrend is to survive, and when you’re on the uptrend is to prosper. Hopefully that’s the idea. But obviously, I’m sure we’ll get into more of these things. But my story is more, I feel a combination of good fortune, good mentorship, good environment, and a little bit of hard work along the way.
Yeah, key ingredients for sure. So why don’t we unpack just private equity? Your investment thesis is kind of at that macro level. Because, you know, most of us, when we learned about investing, you know, even, even doctors, lawyers, no matter what our trade is, right. We weren’t taught about investing. Right. And all that we understood about investing was really to invest in 401ks, some type of IRA, in stocks, bonds, and mutual funds. So that was the core option. So, how would you help people think about adding private equity to their portfolio allocation if they are a traditional investor with the majority of their assets in traditional, either qualified or unqualified, type plans? How would you suggest that people start thinking about adding some mix of private equity assets?
First of all, unless you’re highly sophisticated or there’s a specific state reason, I would tell people to keep their money, most of their money in the public markets. So look, it hurts my business to tell you not to give me all of your money, because I’d love to take all of your money. But I do feel from an investor point of view, what does, what kills a lot of people, look, unless you’re a billionaire, then all bets are off, right? And then it doesn’t matter, I guess. Right. But for the rest of us, liquidity oftentimes has to be equally important as growth in assets. And you kind of have to balance both of these items, I feel. So I feel, I would still suggest if you’re a doctor or physician, and let’s assume you think, okay, I’m getting, I’m growing in my knowledge base, but I might not be where I feel I should be.
I would still suggest keeping the bulk of the portfolio in public securities. Whether that’s a 401k, whether you have a brokerage account, a qualified plan, whatever it is, and then over some time, lay it in basically a tax-efficient tax advantage or other alternative vehicle, just as a sprinkling on the top. So look, if you got, I don’t know, 5, 10, 20 million dollars personally for me, I, look, I have to do it because I’m in the business, so I have to do co-investments. I have to put a lot of my net worth because I have to eat my cooking, right? Because it’s very hard to tell somebody, Hey, give me your money, put it into my deal. But I’m not going to put any of my own money into the deal. So I’m in a very different position because of the nature of my job and role. Right? But if you’re not in my position, you’re not a sponsor of these transactions, you have a day job which is different than my day job, then depending, you know, it could go anywhere from 10 to 30% of your entire portfolio. But again then you’re coming into other factors, like, for instance, what is the quality of your job? For instance, if you’re a physician and you’re on a salary and you’re going to get paid the salary, whether my economy is good or bad, you have a very high quality of earnings versus, say, if you’re in a cyclical industry.
And let’s assume you’re in sales because one year you could be up and the next year you could be down, right? Or you might be in a stage in life where you, you know, your kids are going to private school, there are certain medical issues, God forbid, whatever it is, right? So I feel liquidity. You have to understand your liquidity needs, and then you have to marry them with your balance in your portfolio or growth in your portfolio. Private equity is a great complement, but I do feel a lot of the marketing around private equity is very disingenuous. A Lot of the results that you see around, that are proposed around private equity, are results from, say, a completely different era. And now we’re in a completely different era. But hopefully, when things change, things will improve. But right now, you have to be more defensive.
And when you’re allocating, I would not allocate more than 10, 20, maybe 30% at most. And I would pick between a couple of options. And because here’s the deal, in the public markets, I’m just a believer in this, everybody, your mileage might vary. In the public market, generating alpha is practically non-existent. Maybe there are a couple of managers on the planet who are consistently generating alpha, which is above market returns. But in the private markets, the top 5 or 10% of the managers are taking 80 to 90% of the entire gains in that sector. So the power law. The power law is a way of saying that it is an 80- 20 rule, right?
That applies on steroids in private markets. So if you’re in private markets, pick top-tier managers, maybe allocate 10, 20, 30% of your portfolio, in my opinion, and sort of figure your way out, right? I mean, you’ll figure it out. Once you give your own money, you’ll sort of figure things out. That’s the way I look at it. I think liquidity is very important, and people don’t pay enough attention to it.
Yeah, no, I think that’s a really important point as well. And I like how you said that. Right. The quality of your income, right?. And so that’s one of the key things we’re helping clients with inside of our VFO is liquidity management. Right. It is one of the top things. So, looking at that quality and also creating multiple streams of income, right? So you don’t have a single point of failure, right? Whether it’s one investment, one job, you know, things like that, you have multiple streams of income that can help protect you in a downturn and just, you know, keep keeping that, that cash flow coming in, which is energy, right? That’s energy for all the things that we want to do.
Let’s talk about due diligence. You know, you’ve kind of pointed out that in a down cycle, you know, especially commercial real estate, it’s been, you know, really, really challenging past couple of years here. So, have you changed anything in terms of how you’re underwriting deals or looking at due diligence? You know, what are some of the key lessons that you’ve learned from the past two years that you could help Help to pass on to listeners?
Look, I think everybody’s. Here’s the deal, look, the bulk of the fundamentals, or rather the fundamentals, rather, I don’t think they change. I think the fundamentals stay the fundamentals. Think about it this way. If you are playing basketball, it doesn’t matter if you’re in the championship game or you’re in the regular season; certain fundamentals are going to apply. You’re going to have to play them. That’s just the way things are, right? So the example I use is that fundamentals have stayed the same. You don’t necessarily waver on the fundamentals. But what you do over time, especially when you’re tested, is you keep refining your processes.
Like, hey, it’s not always adding more steps. Sometimes it’s also understanding that things you were doing were redundant. So in this case, for instance, for a few years, you could underwrite everything without even underwriting. It’s not even real underwriting. You could underwrite a 3% rent growth. @ least in our, for instance, vertical. You didn’t have to do a lot, and everybody was making money. So now there is even a greater and more robust analysis, and our comps analysis, understanding demand and supply in the market.
Again, these are all things that are fundamental and should have been done. But as humans, they weren’t done because 10 or 12 years of a bull cycle means a lot of people get fat and happy and get lazy. So a lot of what I think are things people are learning are not necessarily learning. They are just getting more attuned to it now that they have gone through a severe cycle. And to give you an example, it’s very interesting for me to be on these panels, talk to people, and say, “Oh, I will never take a floating rate loan again.” And you’re like, “Okay, that also doesn’t make any sense because what if you’re in a declining interest rate environment, right?” I mean, taking a fixed-rate loan makes absolutely no sense. Or, for instance, people say, “I am going to take a seven.” I have heard this.
I’m going to take a seven or ten-year agency loan only. Great. Their business. But then you look at their business plan, and their business plan says I want to exit this deal between three and five years. Well, the problem there is that you have an asset liability mismatch. Because if you’re going to exit something, say in five year,s and you’ve got an agency loan at 10 years, unless you’re a magician, your prepayment or Defeats or yield maintenance penalties, penalties that you have to pay to get out of that loan are going to just eat you up alive. So the point at the end of the day is you have to match your business plan to your sources of financing. You have to build a big liquidity buffer.
Again, we come to the same thing, right? Same with your portfolio, same as an ortho manager managing this. And then you have to pick the right market, and you have to realize that there are times in the market where there is a flight to quality. So,o for instance, in a downturn usually there is a flight to quality, which means people want more quality assets; therefore, they are going to overbid on those quality assets. And there are times in the cycle when quality doesn’t matter. So you might as well go with the cheapest option. But picking those inflection points, I think you only learn with experience, as opposed to there is no textbook, because textbooks contain this stuff. But a lot of this becomes an art more than a science. So S the refinement of processes, understanding where you are in the cycle, and oftentimes you only know that post fact, and then not having asset liability mismatches in a way I think are the key takeaways.
Yeah, no, I think points well taken. But I do think that some of the top investors in the world are constantly learning and kind of refining that investment thesis. And one of them specifically, I mean, there are a lot of operators, I think, you know, the audience needs to understand there’s this, there’s this an entire, I would call it like a stratification of the marketplace, right? Where you’ve got institutional, right at the top level, and then you’ve got people at the bottom level,l which are doing maybe friends and family, people with smaller assets, things like that, less experience, just kind of putting things together. And then you’ve got lots of things in between, right? People, people that are growing and scaling. And so with that many of those operators that you’ve seen deals kind of floating around have not even seen a cycle before, right?
Or two. To your point, everyone was making money and multi-family on the upside, you know, for over a decade, right? Things were going well. But now there’s been a lot of, you know, harsh truths, right? Coming through with those debts that used floating rates that didn’t underrate quality deals, maybe weren’t aligned in the right markets. Anything else you can kind of point out as to some of the core fundamental challenges in multifamily today that were kind of really a consequence of what happened over the prior couple of years?
Yeah. The core fundamental challenge was that people, I think, number one, two things from a sponsor point of view and an investor point of view, from a sponsor point of view, nobody, everybody keeps saying there is a shortage of housing. I don’t think that’s real. There is a shortage of housing at particular price points or particular points in the market. So, for instance, if you’re on the top end of the market, there is no shortage. I mean, you can get the best product known to mankind if you’re willing to pay the price for it. But let’s assume you’re in the middle-income or slightly lower to middle-income stretch. Yeah, there is a severe shortage.
But you know what the problem there is the problem there is the cost of construction and the cost of maintenance, as an example, are so high that you cannot effectively service that resident and make a profit along the way. So the shortage of housing that you read about, that you used to doubt investing in this particular area, I think it masks a reality that does not exist. It depends on where you are on the cycle if you want to cater to the top end of the renters, as an example, and by the way, this applies in private Equity, applies in VCs across the board, no shortage. As soon as you go down that spectrum, there is a huge shortage. But you do not have a product at a price point that you can effectively service that customer and make money for sponsors. Okay? Now, that being said, from an investor point of view, investors also have to realize that just because somebody’s saying they have 20, 30, 25, 35% IRR, that doesn’t mean anything. I mean, I could say I have a 2000% IRR, it’s a target. And the other deal is a lot of times investors assume a preferred return is some guarantee of a return without necessarily realizing there is nobody on the planet, whether you are a Ken Griffin, a Howard Marks, or some guy off the street that can effectively consistently project, say three, five years down the line to the second decimal point.
But investors typically confuse a projection. And these are, by the way, some really intelligent people, right? So they’re not stupid people. Right? They tend to assume returns with guarantees and a preferred return for sure, as some sort of guarantee. None of these are guarantees. These are estimates. And by the way, the greatest investors like Warren Buffett, I don’t even think he’s touching a 20% IRR throughout his life. Okay, so here’s the problem. If a guy like Warren Buffett can’t, we can use a goat. If he can’t touch that level, how is it that the sponsor that you either met online or were introduced to is exceeding that on saying that they’re exceeding that on every single deal they put out there?
So, eventually, as an investor, you also have to do some due diligence or just put a framework around it to say, “Okay, how is this possible all the time?” And look, you might have found the next greatest thing since sliced bread, but the chances of that are very low. So investors gotta learn. Sponsors also have to learn about the housing shortage. I do believe a lot of sponsors, it’s not like they’re misleading, they genuinely believe that. It’s just that I don’t think it’s an accurate reflection of reality.
Yeah, and it’s probably the same with businesses too. Even if you’re investing in a venture, right? Everyone has a plan, right? Or like, you know, Mike Tyson says, right, everyone has a plan until you’re punched in the nose. So, you know, that plan looks enticing. And then people somehow psychologically feel like, hey, these are the numbers that we’re going to be, you know, exactly mirrored to. But there’s all along the way, there’s a lot of bumps along the way. So I think that’s a great distinction that you make. And, you know, investors should always be wary, always do their due diligence, you know, understand sponsors’ track records, understand the markets they’re investing in, understand the asset class, you know, to a really deep level that they feel comfortable with. And, you know, I would say on average, you know, in the family office space, you know, most family offices are very happy with a 14 to 16% IRR.
And when it starts to go north of that, then they’re asking even a lot more questions, right? Is, you know, is that sustainable? Was that, you know, just a great year maybe that you had, or a great asset, right, that performed well? What is the consistent kind of track record? Because consistency in this game is what pays off big dividends. Now, Omar, I know that you’re big into new development, so why don’t we unpack that a little bit? Because I think a lot of investors are very familiar with, you know, multifamily or just real estate in general, right? Because we can all relate to it in terms of value-add strategy, right? We’re going to go and fix up a place, we’re going to increase, you know, value through adding a pet park. We’re going to, you know, update all the appliances, make it modern, upcharge the rent. It all kind of makes sense, right? Why don’t you tell us why you kind of prefer, you know, new development and talk about some of the, you know, pros and cons of new development.
Investors should always do their due diligence, not just on the deal, but on the people behind it.
Well, look, here’s the deal. I think there’s a time, like I told you, there’s a time and place for everything. So, a strategy that works in an up cycle might not work in a down cycle. As an example. So what happened with us, what our evolution was that we were selling assets in the southeast, Texas, Georgia, Florida, some of these are vintage assets, and we were selling them for close to replacement cost. And as great as the operators we think we are, we’ve got benchmarks that attest to that fact. We also realized this was that you have to be self-aware to realize that some of this is because the market is very frothy and it’s very hot. So if some guy shows up with a bag of cash that’s going to pay your 80s or 90s vintage assets for new construction price, yeah, you’re going to sell that asset to them all day, every day, and twice on Sundays.
But you know, that’s not an accurate reflection just of your abilities. It’s a market helping you along the way. So knowing that what we did was, okay, well what is the biggest value add with the biggest moat around it within our sector at least, and the biggest value add, but the biggest moat around it is always going to be development because you can’t just show up with a bag of cash and start going. You need to have specific knowledge and specific experience in various aspects of this business, number one. Number two, we were selling our assets in the Southeast. And again, did we accurately know what was going to happen with the interest rate rising? No, but you have some feelings, but you don’t accurately know. So for the assets that we were lucky enough to sell at great prices, return great returns to investors, we took a lot of that money and we funneled that into developments in the upper Midwest. I’ve got two very long-term partners, and the idea there was, hey, you’ve already made these gains.
Now protect these gains and push them into a product that is very desirable in that market. Primarily because there is not a lot of hard money or institutional money at that time that was in the market. Now, a lot of that is coming in because they’re seeing the safety and stability of the Midwest market versus this constant roller coaster in Texas, Florida, Georgia, some of the sunburned states now. That being said, it also took us a few iterations to figure out the type of product we wanted to cater to. Because earlier in the conversation, as you remember, I said top end of the market, there is no problem. There is an oversupply issue. Like, if you’re at the top end of the renters. Yeah, you’ve got to pick up your litter.
Your best protection as an investor is due diligence on the people, not just the project.
So we iterated on a product, and we put a lot of our money into this. We iterated a product where we realized that a lot of the upper-middle-class residents, who are in great markets, have great household incomes. I think our average resident is anywhere between 75 to $90,000 median income. These are great residents. They can pay, they want a great place to live, but they’re not going to pay $2,000 a month for a one-bedroom. So we iterated and we created a product over multiple iterations. We call it the reserve style model. It’s a marketing moniker.
And what we’ve done is it’s a three-story, garden-style, walk-up, no elevator product. We provide only core amenities. So you’re not going to see like a juice bar there, or you’re not going to see underground parking. Because when we did the math on that, we quickly realized that these types of items were adding anything from 30 to 40% in terms of cost, but they weren’t necessarily. The rent differential was maybe 7 or 12%. So you can see the math was working in our favor. The second thing there was, look, if you’re building these buildings that are a monolith, you kind of have to deliver the whole building before you get a certificate of occupancy. Right.
Otherwise, you can’t move people in. So you can’t be done with say three floors out of six and move people into the first three floors. Typically, no municipality is going to allow you to do that. Right. You kind of finish the whole thing, they do the inspection, then they give you that certificate. Well, the problem there is that every developer on the planet is going to tell you they’re going to do this in 18 months. It typically takes 20 to 22 months before you can move the first person in. And after that, you then have to start leasing.
And your team is under stress all the time because now you have to lease the entire block of apartments in one go. So we iterated on this product. What we realized was, look, instead of delivering all these buildings in one go, how about we have multiple buildings? So, say 2015, 2025 units per building. And we deliver these buildings as they become available because each building gets its occupancy Certificate. So when we can do that, we deliver the first units on these apartment buildings. These are phenomenal interiors and exteriors. Great design. We honed in very nicely on the design element of things.
We’re delivering the first units between 8 to 10 months, typically 9 months. The entire project in 14 to 16 months, entire project. And we’re 90 to 95% occupied between months 15 to 18. So by the time another competing product is just delivering, or rather, they say they are going to deliver, by that time, we’re 90 to 95% occupied. So now think about it this way. Even if we have the same loan, same term, same maturity date, we have a higher ability to push up our income with the ability to refinance or sell as the loan is maturing, versus this regular guy over here. But that took a few iterations. There are fundamental issues there that we had to solve.
And because we were able to do that, I have great partners; thankfully, we were able to solve this problem, and we’ve been very successful at it. So, you know, again, but you have to understand this is meeting a moment in need in time. So let’s assume the market becomes crazy like 2020 or 2021. Then, at that time, there might be a different play that has to be played. So this is a very good product for a moment in time because investors are not just investors, residents, people who are going to rent out your buildings. They are tapped out. A decade-plus of double-digit rent growth means they can’t afford to pay more. So all you now have to do is focus on providing quality housing.
But you have to cut costs on your buildings. And that’s what we’re doing. Our hard cost of construction is low to mid-130s to maybe early 140,000. The unit is a wrap or a podium product, it takes anywhere from 180 to 190,000 just as a hard cost of construction. So all those savings is savings that go to the bottom line. Because it’s a dollar and cents game. Right. It’s not a tech play where you can become a billionaire overnight.
Yeah, no. I love the creativity that you can have with real estate and breaking those down into smaller units rather than the whole thing, and then waiting for the lease up and getting that in before you can start to drive re. That’s a strategic move. And you know, we’ve seen that on the development side where there’s a certain niche, right, with an operator, a product, they have some kind of niche, some kind of competitive differentiation that usually kind of makes it shine above the rest. But talk to us about some of the risks because again, I think there’s some, definitely some inherent risks when you’re investing in new development that you know, most people may not necessarily understand. On the commercial real estate side, oh, 100%.
As an example, for instance, I have never for the life of me understood how a lot of people who are not in construction do not have a construction partner. Hire third-party GCs. They do not have these teams built out. Because here’s the problem, guys. If your third-party GC has no incentive, no alignment of interest, God forbid, in the off chance that either that person leaves your project, you can’t just put a new person in and just start like that. It doesn’t work like that. So for our partnership, my partner Caleb has a, has multi-generational construction company. But how we’ve aligned interests there is that he signs on the recourse loans alongside us.
So God forbid, if things go sideways, he has a personal guarantee on this thing. Now, how does he get compensated? He gets a share of the general partnership. I might as well give, I might as well have partners where everybody is contributing, and we split the pie, versus partners where one partner tries to get all the money and then everybody else feels aggrieved. And then some things don’t work out long term.
Right. So, having a shared aligned set of values is important. But look, in development, your biggest risk as an investor, or just anyone, I guess, as for that matter, is will this project will be delivered and will it be delivered on time and budget? And we’ve been able to do that. But I can tell you this, that I know of countless examples.
Dallas, Phoenix, Tampa, Jacksonville. I value-added sponsors did not have their development team built in internally. And they were like, all right, let’s try to do development because we can try to make more money. And they are two, three, four years into their projects, and the projects aren’t even completed yet.
So that’s a huge risk. So you need to understand and hone in on that, on the capabilities of the team and whether they have done this in the past or not. So, finding the right partners is extremely important because there is not a lot of value to a 20% completed development project. Just a shell.
It’s not even a shell half the time.
Yeah, no, really good takeaway there for sure. And let’s kind of just transition back to a macro level and your sense of the market. You know, again, we’re not going to hold you to any of these predictions here. Right. As no one can foresee what’s happening in the future. You turn on the news these days, and there’s some kind of major event, at least it seems like there’s a major event going on, you know, on an hourly basis these days.
But let’s, you know, let’s just kind of, you know, bring it up to 30, 000 foot level and just say like, you know, where, how are you feeling as an oper, someone who’s, you know, highly vested in this space, you know, where, where do you see, you know, commercial real estate multifamily in particular kind of heading, you know, within the next three years?
Well, I feel number one, this is not just self-serving. I feel we’re at the bottom of a cycle. So whenever it is the most painful to invest mentally, we know this. That is usually a time to go, like you should invest more, because it is your peers are not investing. You can find a better deal just because there’s less liquidity and fund flows in the market. So I feel we’re at a cyclical bottom.
It is a great time to invest, especially because interest rates seem to be cresting a little bit. I mean, there’s some volatility, and I don’t think interest rates are going to go back to the close-to-zero percent interest rates that we had.
But look, any amount that is materially. If your belief, as an example, is that if I look out two or three years and I believe there’s a higher probability of interest rates being lower than where they are today, and assuming you have the right partner, you should be a net buyer of interest rate-sensitive investments.
These include real estate, these include private equity, and other alts. If you believe that interest rates I believe are going to be around roughly the same level, if not higher, in two or three years, you should be a net seller of real estate and other interest rate-sensitive investments.
Now we believe in the former. We believe all these years of high interest rates have created a structural problem. Again, not a lot of supplies are hitting the market once the current one is absorbed. So you’re going to go back into a supply shortage issue number one.
Number two, if interest rates are going to be lower, that’s our house view in two or three times higher probability of them being lower. It’s not a certainty. Then if you acquire anything finance that works at today’s interest rates, well, sure as hell it’s going to work.
At a lower interest rate. That’s not rocket science. So that’s the way we look at it. But again, you need to have some sort of a view. You can’t say, “I don’t have a view, and I’m just going to create value out of nowhere.”
Because yes, you can create operational value, but if you’re exposed to interest rate-sensitive investments, interest rates and macroeconomic factors play a huge role in the result of your investment.
And how would you be underwriting debt in this market right now?
Well, right now, on our construction debt, it’s all fixed-rate debt, four to five-year terms. We, as I told you, have nine months to first unit delivery, 14 to 16 months for the entire product to be delivered. So we feel we have anywhere from two and a half to three terms of our rent roll. And our construction debt is usually about 150 bps to 200 bps higher than where agency or hard debt is. So there’s a little bit of a margin built in there, right?
If it works at the construction debt level, it’s going to pencil out at the agency and hard level. But that being said, we’re also doing a lot of restructurings for a lot of syndicators that are in trouble. And that’s a completely different ballgame because then you have to get into the loan docs, negotiate with lenders.
There’s a whole bunch of steps there. But the way I look at it is, depending on what you’re doing for our developments, it’s fixed-rate exposure right now. But look, two or three years from now, it might not be fixed-rate exposure. We have to go with the times. There are no like absolutes.
Yeah. Any other things that investors should be kind of watching or paying attention to in this market here, 2025, I think?
Look, if you’re investing with people, the biggest issue is doing due diligence on the people, their abilities, and the composition of their team. If somebody’s a one-man or two-man people operation, it’s probably not going to work out. Right. It’s got nothing to do with their abilities. It has everything to do with the fact that you need to have teams that help you come.
This, this whole idea of a loan sponsor or investor doing everything, doesn’t work out. There’s a team and risk involved as well. So, looking at the composition of the teams, their tenure, their capabilities and abilities, looking at the whole organization, looking at the track record, but also then having a house view that you could have the best team on the planet.
But if it’s in a section of the market you don’t want to invest in, then it doesn’t matter. So you need to have some sort of a view. You need to be some sort of aware or make yourself aware. But at the end of the day, a lot of this boils down to the people.
Yeah, Omar, if you could give just one piece of advice to the audience about how they could accelerate their wealth trajectory, what would it be?
Yeah, my one piece of advice would be to basically what? It depends on where you are on the wealth cycle. So, for instance, you’re starting, it’s a very different ball game to say you’re 20 years into this. So if you’re say 20 years into this, you’re a high-income earner. I don’t know, you make 500,000, a million? A little bit more than that. Right.
You need to start paying attention to tax efficiency as much as investment gains. Because, as an example, if you’re in the great state of California and you’re taxis are 50%, well, no investment that I know of is consistently going to throw off 50% year on year. So you’re better off focusing on our tax efficiency and structuring versus necessarily finding the next greatest investment, as an example.
I mean, you should try to do that. But really, if you have to spend a finite amount of time, focus on tax efficiency, tax structuring, all of that sort of stuff that’s going to generate the most after-tax dollars to your bottom line. But look, if you’re at the start of your career, I would focus, I wouldn’t worry about taxes too much. I’d focus more on upskilling.
But at the end of the day, guys, just remember, nobody saved their way to prosperity. You have to invest, you have to take your lumps. That, that’s been the story throughout the ages. You have to aggressively invest and live below your means.
Sage advice, Omar. Appreciate all the wisdom and your time today. If people would like to reach out and connect with you, what’s the best place they can find you?
Look, you can join my mailing list by going to boardwalkwealth.com or wealth.com. The form is right there on the homepage.
Again, that’s @boardwalkwealth.com awesome, thanks again, really appreciate it, Omar.
Thank you, Dave.
Thanks for listening to this episode of Wealth Strategy Secrets. If you’d like to get a free copy of the book, go to holisticwealthstrategy.com that’s If you’d like to learn more about upcoming opportunities at Pantheon, please visit pantheoninvest.com.